Back in the ’50s, each branch of the military handled its own contracts and its own accounting. This was a veritable mess as the country went through a lot of wars at this time. We needed one agency to provide standardized audits for the Department of Defense.
The Defense Contract Audit Agency handles audits for the Department of Defense including financial and accounting services for contracts to all components of the DoD that are part of the procurement. They have audited small to huge contracts, and even at one time– NASA!
How to comply with the DCAA? It’s kind of a trick question. The DCAA does not certify contractors if truth be told. The DCAA has certain requirements and recommendations that they want to see from your company. These procedures and policies are best documented and applied to your company. The tracking of costs, and its integration to your timekeeping, as well as reports, are some of the features that the DCAA wants to see when they do their audit.
How to prepare? As a Government Contractor, you should be prepared for the many types of audits that the DCAA has in store for your company. You are even being audited before you get the contract (pre-award), and right after you already have the contract (post-selection). If you haven’t, the absolute guide would be the DCAA-CAM or Contract Audit Manual. It’s readily available online here: https://www.dcaa.mil/Guidance/CAM-Contract-Audit-Manual/
If you want to go through all of these, they also have all possible checklists that will be used to check for your adequacy. These lists are also available on their website here: https://www.dcaa.mil/ChecklistsAndTools/
During their audits, apart from the procedures they have, the DCAA has a set of rules specifically made for government contractors that they are going to use– the FAR and the CAS. The Federal Acquisition Regulation is quite literally the hitchhiker’s guide to Government Contracting, used when there is a need to purchase goods and services. If you have time, you can head on over here to download the entirety of it: https://www.acquisition.gov/browse/index/far
The CAS or Cost Accounting Standards, in parallel, are the 19 commandments of cost for Government Contracts. These standards are put in place to make sure that there is consistency in the assignment, allocation, and measurement of costs to Government Contracts. If you need to brush up on your CAS, you can get them here.
Just remember that before you even get awarded the Government Contract, the DCAA will be there to scrutinize you. Even though you are checked for a lot of stuff, they will not answer anything specific on how you can pass their checks to acquire the contract. Once you get the contract, you will again be checked if your company is competent enough. Are you maximizing the people’s taxes with your policies and procedures? They’ll check how you handle and identify costs, how you integrate timekeeping, how you make reports, how you match against standards, and how you are keeping the Government contract secure.
It’s nerve-wracking, tedious, and quite time-consuming. Not to mention the numerous rules and regulations that keep on changing, making the audit process more complex than ever. Always make sure to have a dedicated team to handle your accounting and always be prepared for these audits as they are very much different from any other private contracts your company has dealt with before.
If you plan to enter the world of Government Contracting, or you’re already in and getting confused, let’s talk about it. Drop us a line, so we can tell you how we can improve your Government Contract Accounting and maximize your earnings. Click here to get in touch!